RIGA CITY MARKETING STRATEGY: TACTICAL RECOMMENDATIONS TO CONSIDER

BAIBA Y. LIEPINS RIGA, 2006 The following recommendations are based mainly on a review of the various reports and documents produced on the BaltMet Inno Project, participation in a study visit to Oslo and review of reports on study visits to other cities and on meetings with representatives of the Trade and Investment Division of the Province of Ontario, Canada, for a transatlantic perspective.

Overall Conclusion

In order for a relatively small city like Riga – with its low international profile and limited budget possibilities – to succeed in attracting businesses to establish in the area, its marketing strategy will need to be extremely tightly focused. Many other cities/regional centres in the surrounding geographical area, as well as in areas farther away have already acquired reputations for favourable conditions for business development, particularly in high tech fields and those sectors associated with innovation. Many of these cities/regions have far greater financial and other means at their disposal to build on the successes they have already achieved. For Riga to compete, it will need to concentrate on marketing to specific industries, from specific source locations and through very specific marketing programs and instruments. A broad approach relying on the generally positive attributes of Riga will have little chance of succeeding.

1. Identifying Industries to Target/Analysing the Competition

Probably the most promising categories of target companies will be those in which successful businesses already exist in Riga and its environs and those which will have ready-made access to a sufficiently large choice of supplier and partner firms for their particular types of business.

Such categories should be analysed and rated according to factors such as critical mass already achieved for that industry category in Riga; general growth potential of the industry; industry-specific resources and support available in Riga such as appropriately educated professionals and workforce, opportunities to cooperate with educational institutions, transportation and communications facilities, raw materials,

2 specific supplier and partner opportunities; and, importantly, the relative advantages Riga can offer such industries compared to competition.

Competition could be defined as those cities/regions that a prospective target company might consider within a range of location options. Within Latvia, these might include Ventspils, Liepaja, etc. Outside of Latvia, these would include Tallinn and Vilnius; other Eastern European centres; and possibly other nearby cities/regions. Competition may be different for different industry categories. Defining relevant competition should be based on surveying location decision makers in recently established existing locations and decision makers in companies potentially considering a move from their present locations or firms about to be established. The importance of well-conducted professional qualitative and quantitative market research cannot be overemphasised here.

As well as actual objective advantages/disadvantages of Riga vs. other competing locations, it is important to also consider opinions and attitudes of companies in the target categories, as their perceptions will have their own reality and guide their decisions, even if they may sometimes be based on false assumptions.

The research needs to include in-depth interviews with decision makers in companies that have started up or located in Riga to get as full an understanding as possible of why they chose Riga, what strengths and weaknesses they see in this location, what problems they may have incurred, what unsatisfied needs they may still have and how they rate Riga vs. other possible choices. More difficult but also very useful would be to identify and interview companies that seriously considered Riga, but chose another location, to understand their motivations.

Riga’s strategic planners will need to be ruthless in their assessment of realistic marketing advantages vs. competition. In many instances, it may be better to seek opportunities to collaborate with other prospective locations – especially in the case of other cities/regions in Latvia – than to attempt to compete head on.

3 The end result of the analysis should be a narrow, strictly limited list of prospective industries to target, which can then be the base for identifying actual companies to target with an individualised approach.

2. Targeting Source Locations

Similarly to analysing industries to narrow down a target focus, it will also be important to be selective in identifying the countries/regions from which Riga can best attract companies to relocate or start up new businesses. Successful recruitment of companies will depend heavily on a personalised approach, which will be expensive and therefore will need to be concentrated on limited targets.

Realistically, Riga will not be able to afford to cast a net worldwide, but will need to focus on nearby countries in which favourable pre-conditions and general attitudes already exist. Examples of such conditions would include geographical proximity, good positioning for transportation flow; existence of companies from the source country already successfully operating in Latvia; good inter-governmental relations; established contacts and communications, for instance through chambers of commerce and other business/professional associations and/or educational or other contact groups; inflow of tourists and general positive public perceptions of Latvia as a country to do business in; significant Latvian expatriate populations; specialised needs, such as Russian language capabilities and/or distribution channels combined with other business needs.

With respect to attracting local Latvian businesses to Riga, assuming there is already an effective network in place for identifying prospective start-ups; an individualised approach will be easier. Less will be needed to explain Riga, but efforts will be needed to assist the company with contacts, networking, coping with red tape and arranging favourable conditions in Riga. To avoid unproductive competition with other Latvian cities/regions, mutual agreements should be sought on developing complementary niches and other ways of cooperation for mutual benefit.

4 3. Establishing a Brand Identity and an Integrated Hierarchy of Selling Propositions

From the process of identifying targets, understanding what their selection criteria are and analysing what Riga can realistically offer, a market positioning needs to be developed to consist of an overall platform and a network of interrelated benefits to prospective targets.

The brand image that should be conveyed to business targets needs to be consistent with an overall brand image for Latvia as a country. So far, a clear and distinctive brand image for Latvia does not seem to have been established, although there have been various studies, discussions and advertising campaigns that have partially addressed this goal. This will entail cooperation with those responsible for marketing to tourists and creating a general image of Riga and Latvia abroad.

While a strong brand identity will be enhanced by a well-designed logo and catchy slogan, the brand needs first and foremost to be built upon a distinctive set of benefits that are recognised as relevant to the target. That means that the content of what Riga has to offer needs to be worked out first – before brand communications can be developed.

The brand image for Riga as a place for innovative business development will need to be based on the competitive benefits that Riga can offer. These benefits must be as distinctive and unique as possible in their essence and also need to be presented in a distinctive communications’ package and manner. To the extent that Riga’s representatives and marketing communications merely repeat promises that echo those of other cities, Riga’s voice will be lost among those with bigger marketing budgets and greater resources. As part of a targeted approach, the benefits promised by Riga will need to be industry specific and will need to be worked out on as individualised a basis as possible and, moreover, be conducive to custom-tailoring to particular companies.

5 4. Selecting Marketing Programs, Instruments and Media for Business Targets Abroad

Generalised marketing programs, such as would be needed to raise awareness of and promote positive attitudes to Latvia and Riga, and would be unaffordable. To be effective at all, a mass campaign needs a minimum weight which is likely to be completely out of reach to those responsible for marketing Riga to businesses.

Suitable elements of a more modest but targeted approach could comprise:

 Brochures, pamphlets and other printed materials for distribution in existing Latvian embassies, consulates and other Latvian organisations in targeted foreign countries, as well as during special ad hoc events and in direct mailings to selected prospects. Such materials can be useful tools in a targeted approach, especially when used in individual presentations. Mass mailings are not likely to be cost effective.

 Engaging Latvian representatives already in diplomatic posts in target countries to organise meetings and events, facilitate contacts and networking, and otherwise promote Riga as a location for business and to contact specific targeted companies on an as required basis, in concert with the responsible persons from Riga. This will require considerable coordination and a commitment of a significant portion of time on the part of the diplomatic post.

 Placing a special representative to promote Riga in selected target countries, not necessarily in the capital city, where a concentration of target companies has been identified. This person would be expected to identify prospects and make direct calls and presentations as well as to coordinate visits and missions to/from the target area.

 Participation in selected trade fairs and other international events. The key here is to be extremely selective in the few events to participate in; to plan intensively, prearranging contacts and meetings with prospects; focused and

6 customised materials; and thorough, sustained, follow-up of key prospects afterwards. Participants in trade events often come away empty-handed, having treated the opportunity as an exploratory mission rather than a targeted and pre-planned drive.

 Advertising in business and trade journals will usually reach an overly wide audience and is unlikely to be cost-effective. There may be some exceptions, however, in the case of highly specialised publications targeted to specific niche industries, especially if the advertisement can be timed to combine with a specific event or offer.

 Personal calls and sustained and purposeful contact with selected target companies is likely to be the most effective approach, yielding the highest proportion of positive results. Of course, the success of this approach will depend largely on identifying high-potential prospects and customising the communications strategy with the prospect.

5. Selecting Specific Prospect Companies

A considerable body of statistics and analysis already exists on the types of business already operating in Riga and Latvia. If it is accepted that targeting new businesses in the same or related industries is the most promising approach, it would make sense to research other companies abroad or in Latvia that could benefit from possible opportunities within the selected target niches in Riga. A customised and personalised approach is likely to be most fruitful in identifying specific prospects within these niches.

To select promising prospects in other countries, there will almost certainly be a need to supplement available public information with on-the-spot research involving either a trade and development or diplomatic representative from Latvia who is resident in the targeted country and/or to engage specialised consulting services in that country. Any research should be tightly targeted and not of a generalised ‘fishing expedition’ nature.

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6. Enlisting Active Support of Existing Businesses in Marketing Efforts

An effective method used in other cities/regions has been to develop case studies of the achievements of successful indigenous and foreign companies that have prospered through locating in the city/region that is being promoted. Engaging representatives of the companies on which the cases are based as models to participate in the marketing effort can be highly effective. Naturally, there needs to be potential mutual benefit in the interaction for the existing company as well as the target company for this approach to be work.

Logistically, this is relatively easier to implement in the case of local prospects than in the case of companies abroad. Judiciously planned and targeted, trade missions to selected countries/regions abroad can, however, be very effective. Again, this requires concentrated pre-planning and follow-up.

7. Creating Business-Friendly Conditions

For both indigenous businesses and those from abroad, facilitating favourable conditions for their start-up and smooth operation will be important. In the case of local start-ups, this can be more a matter of ensuring their survival than of enticing them to choose Riga vs. other locations.

General factors which are most likely to positively influence choice of location include:

 Political and economic stability and predictability.

 Stable, transparent, easy to understand and follow laws/regulations governing the establishment and running of businesses.

 Low level of ‘red tape’; ease of negotiating the bureaucracy.

8  Low or competitive business costs, including a favourable taxation system. This means not only competitively low tax rates, but also a system which is simple, straightforward and predictable. The tax system needs to be perceived as fair; penalties should be clearly appropriate relative to the gravity of the infractions they are intended to deter. The penalties must not appear to be disproportionately punitive in cases of honest error as opposed to deliberate evasion or fraudulent activity. Moreover, tax penalties and collection procedures should not be structures so as to give the impression of being a disguised money-grab on the part of the government.

 Appropriate labour quality and costs. Depending on the type of business, the ease of recruiting affordable educated or skilled/specialised managers and employees may be more important than absolute low cost. Certainly, if Riga is to attract innovative or high tech businesses, the availability of a workforce with the right professional/technical skill sets and language proficiencies will outweigh the availability of cheap unskilled labour in relevance.

 Appropriate infrastructure. Depending on the industry, transportation, communications, raw material accessibility will be more or less key factors. Quality of local financial services may be another key factor for some businesses.

A key point to be made here is that the new company will need individualised guidance and support in negotiating red tape and otherwise coping with specific local conditions before its own management becomes fully versed in the specifics of doing business in Latvia. The role of those responsible for marketing Riga should include providing or ensuring access to individualised consultancy for companies during their inception and settling-in phases.

In some places, eg. Oslo, the city’s own marketing/facilitating bodies are careful to limit the direct consultancy services that they provide to client businesses so as not to infringe on the business of private sector consulting firms. Other places, such as

9 Ontario in Canada, take a more hands-on approach, with a sizeable team directly responsible for providing advice and facilitation to new companies locating there. In the case of Riga, budget constraints will likely allow only a low level of direct individual advisory service. However, in that case, it will be important for Riga’s marketing department to ensure that they are capable and ready to guide prospective client companies to appropriate qualified private sector consultancies as needed.

In the case of foreign companies locating in Latvia, the persons fulfilling the consultancy function on Riga’s behalf will need to be thoroughly familiar with local conditions and requirements as well as having a good understanding of the corresponding conditions in the company’s home country, so that they can anticipate and help prevent specific problems that are likely to arise from differences.

Those responsible for marketing Riga as a location should also perform a lobbying role with the national and municipal authorities to urge simplification and rationalisation of existing laws and regulations with a view to ensuring these do not place Riga in an uncompetitive position.

In addition to promoting competitive general business conditions, Riga’s marketers will also need to identify factors specific to target industries and work to creating competitive advantage in those. For example, some countries/municipalities offer special tax breaks for certain kinds of businesses and activities, such as R&D.

8. Quality of Life as a Criterion for Choosing a Location

Perceived poor quality of life is more likely to be a negative factor causing a company to reject a location, than is a positive perception likely to tip the scales in favour of a selection. The quality of life in Riga – historic architecture, cultural and culinary opportunities, etc. – can honestly and fairly be described in very attractive terms. However, this is generally true of the other Baltic capitals as well as of several other European cities. Therefore, it is not likely to be a competitively decisive factor, except perhaps where there may be Diaspora Latvians involved in the selection decision.

10 Nonetheless, marketing Riga in general – to tourists, businesses and anyone else – should ensure that Riga does not fall behind the competition. In the event of more or less apparently equally attractive business opportunities in competing cities, the decision makers may take into account factors such as:

 general living standards

 personal safety, low crime rates

 quality of education for children

 health care for families

 availability of choice in affordable consumer goods and services; convenience of the shopping experience

 range, quality and affordability of cultural and recreational opportunities (opera, other classical and popular music, sports, entertainment, restaurants, museums, etc.)

 city character – architecture, parks, layout of centre area, clean streets

 ease and affordability of travel to home country, holiday and other destinations

 ease of getting around in town – by car, on foot, by public transportation

 unique products or cultural events – such as the Latvian Song Festival

 compatible social values with those of home country or personal preference

 personal preferences or interests of individual decision makers who will themselves be relocating or frequently travelling to the selected city/region

11 These are all factors that the persons working with a target prospect should bear in mind so that that the individual decision-maker’s personal preferences and priorities can be positively addressed to help clinch the deal.

9. Seeking Opportunities for Cooperation with Other Cities/Regions – in Latvia and Abroad

Latvia is a small country and Riga is a relatively small city with limited financial resources. While it may be possible to ‘to go it alone’ in specific target niches, there is likely to be increased opportunity in joint efforts with other cities/regions in Latvia and abroad.

With respect to cities in Latvia, pooling resources can allow for a more visible and powerful marketing efforts abroad. If not already doing so, those responsible for marketing Riga should initiate discussions and negotiations with their counterparts in other major Latvian cities with a view to identifying opportunities for cooperation, joint activity and perhaps a mutually beneficial division of targets.

In the case of other cities abroad, there may be opportunities to take part in already fully or partially developed pan-national schemes in instances such as a regional biomedical cluster. The Scandinavian cities, for example, seem to have extensive well-developed cluster networks into which Riga may be able to fit. This will, of course, involve studying the already existing pan-national segments and liaising with the respective city/regional departments to identify potential niches and methods of entry for Riga. An obvious area for potential joint effort would be with the other two Baltic capitals, in which Riga may have a natural advantage as the largest and most central city. In all of these negotiations, it will be necessary to identify opportunities that offer advantages to all participating cities/regions, not just benefit one side or another.

12 10. Other linkages

Linkages with educational and other professional institutions, for joint research and development activity, can also be developed to provide competitive advantage and broader networking opportunities in the area of technical and intellectual innovation.

13 Appendix: Observations from Meetings with Province of Ontario Representatives

In the course of a trip to Toronto in May, I took the opportunity to meet with Reed Barrett, Director of Trade and Investment Marketing, and John Langley, Director of Investment Branch Sales & Services of the Trade and Investment Division of the Department of Trade and Development of the Province of Ontario, Canada. This is the department that is responsible for promoting trade with and investment in Ontario, including attracting and facilitating the location of foreign companies in Ontario. The department employs more than 100 people and has been successfully operating for some time.

The department has a very clearly defined target and priorities. Although there is some activity involving other countries with which Ontario has trade, the region’s primary goal is to induce American companies from selected industry sectors to set up within Ontario’s geographical clusters formed around the province’s major cities. In this, Ontario competes with other major industrial centres in Canada as well as with the many that exist in the USA. Overt competitive effort is directed against the USA. None of Ontario’s formal communications makes any comparisons with other Canadian cities/regional centres.

Ontario’s target industry sectors are:

 Automotive and manufacturing (based largely on longstanding historical free trade agreements with the USA)

 Business process outsourcing – mainly call centres dealing with HR, payroll, customer relations management, data mining – offers advantages to US businesses based on lower average costs combined with sophisticated methodology and equipment and skilled employees with ‘neutral accents’ (ie. not recognisable as non-American)

 IT

14  ICT

 Life Sciences o Environment o Chemical

The emphasis is on the latter three high tech, knowledge-driven sectors. Special focus is placed on R&D and innovation.

Ontario markets in a very selective way. A lot of effort and expense is allocated to research. Participation in trade missions and international events and in trade advertising is relatively limited and highly focused. Much more emphasis is placed on individual presentations to and sustained communications with specific target companies, most of which are identified through research, through leads from companies that already operate in Ontario or from other network contacts.

Selling propositions are tailored based on analysis of specific target company interests but there are some general promotional points which attempt to favourably position Ontario vs. American location alternatives:

 Lower tax rate than US average by 4 percentage points (lower tax is true of some but not all US locations, as US tax rates vary from state to state.)

 Special tax discount on R&D (part of the focus on attracting high tech companies.

 Highly educated/qualified workforce (international statistics are cited in support)

 High quality education facilities, at a lower cost at tertiary level than in the USA

15  Publicly funded universal health care (public health care is mainly privately funded in the US)

 Ontario quality of life for company management expats (lower crime rates, more liberal social values)

 Spouses of transferred foreign national management can apply for their own work permits (not so in USA – spouses are given residency permits as non- working dependents)

 Highly developed infrastructure

In the case of Ontario, the USA (which has a population about 10 times the size of Canada’s) provides an enormous target market. Ontario’s positioning exploits the fact that the Canadian culture, main language and living standards are comfortably close to those of the USA (Americans do not feel like Canada is ‘foreign’), while at the same time offering some specific competitive advantages.

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